*1309 The transferor taxpayer filed a return for 1923 on June 12, 1924, reflecting all transactions during that year except a sale of its assets on August 3, 1923. The sale was referred to therein but no gain therefrom was reported. Held, such return set in motion the operation of the statute of limitations and the assessment of the deflciency in tax resulting from such sale for 1923 against petitioners as transferees is barred by the statute of limitations.
*564 These consolidated proceedings involve the liability of petitioners as transferees of the property of the Nibley-Mimnaugh Lumber Co. for the deficiency in income tax liability of such corporation as determined by respondent for the year 1923 in the amount of $48,952.15. The respondent has determined the petitioners severally liable for such deficiency in amounts as follows:
| Name | Docket No. | Amount |
| C. T. McDaniel | 99189 | $2,000.00 |
| Estate of Addison L. Tulley by Jesse E. Tulley, trustee | 99190 | 3,334.00 |
| C. A. Hunter | 99191 | 24,504.90 |
| J. F. Ravenscroft | 99192 | 13,002.60 |
| Earl J. Pfeffer | 99273 | 2,550.50 |
| Emma P. Hackett | 99302 | 1,900.00 |
| Eugene J. Mimnaugh | 99358 | 13,000.00 |
| L. Mimnaugh Johnston | 99377 | 13,000.00 |
*1310 The questions involved are whether the assessment of the amounts involved against petitioners as transferees is barred by statute and whether the petitioners, Eugene J. Mimnaugh and L. Mimnaugh Johnston, are transferees of a transferee of the peoperty of the Nibley-Mimnaugh Lumber Co. within the meaning of section 280, of the Revenue Act of 1926. The record made consists of the pleadings, and a written stipulation of facts, with numerous exhibits attached thereto. All facts contained in the stipulation not set forth herein are incorporated in our findings of fact by reference.
FINDINGS OF FACT.
The petitioners, excepting petitioners Eugene J. Mimnaugh and L. Mimnaugh Johnston, were stockholders of the Nibley-Mimnaugh *565 Lumber Co. (hereinafter referred to as "Nibley-Mimnaugh") at the time of its dissolution. The company was incorporated under the laws of Oregon in 1907 and was engaged in logging and lumbering, with its principal office at Wallowa, Oregon. Its capital stock consisted of 5,000 shares of the par value of $500,000. The petitioners, Eugene J. Mimnaugh and L. Mimnaugh Johnston, nee Lillian Mimnaugh, are the son and daughter, respectively, of J. H. Mimnaugh, *1311 deceased, who at the time of his death on September 15, 1922, was a stockholder of the company. The stock held by him passed into and became a part of the corpus of his estate, which was administered under the laws of Oregon, and the estate thereafter continued to hold the stock until the dissolution and liquidation of the company.
Prior to August 1, 1923, negotiations for the sale of its lumber, timberlands, lumber-manufacturing plant, and personal property situated theron, were carried on by Nibley-Mimnaugh with the Bowman-Hicks Lumber Co. On August 1, 1923, the stockholders of Nibley-Mimnaugh designated J. F. Ravenscroft "as trustee to hold, operate or sell the assets" of Nibley-Mimnaugh. The next day, August 2, 1923, the directors of Nibley-Mimnaugh authorized Ravenscroft "as Liquidating Trustee" to sell and convey the company's assets except cash and accounts receivable. On the same day the contract to sell the assets to the Bowman-Hicks Lumber Co. was executed.
The selling price was $1,150,000, of which $100,000 was payable at once, $350,000 was payable upon the ratification of the contract by the stockholders of Nibley-Mimnaugh and the balance of $700,000 was to be*1312 evidenced by five negotiable promissory notes dated August 3, 1923, bearing interest at 5 1/2 percent per annum, maturing at one-year intervals thereafter and secured by a purchase money mortgage. The purchase price was paid in accordance with the terms of the contract.
The purchaser took possession of Nibley-Mimnaugh's mill and timber holdings on August 3, 1923.
In September 1923 the stockholders and directors of Nibley-Mimnaugh formally ratified the acts of Ravenscroft. Resolutions were adopted to dissolve Nibley-Mimnaugh and the directors appointed Ravenscroft as trustee to wind up its affairs and to carry out the terms of the contract of August 2, 1923. On January 15, 1924, by a written contract, adjustments were made as provided in the contract of sale respecting incurable defects in title, which resulted in a remission to the purchaser of $66,508.07 of the purchase price to be deducted from the notes. The deed of conveyance covering the mill and timberlands and the bill of sale were executed on February 28, 1924. On March 7, 1924, the Corporation Commissioner of Oregon issued a certificate of dissolution of Nibley-Mimnaugh.
*566 On or about December 14, 1923, $200,000*1313 in cash was distributed to the stockholders of Nibley-Mimnaugh according to their respective stockholdings. The remaining assets of the company, including the promissory notes of the purchaser, were distributed to its stockholders during 1924 and thereafter it was entirely without properties or assets of any description or value. The amounts in cash, or its equivalent in value, so distributed to the stockholders herein involved were as follows:
| Docket No. | Name | Shares | Amount received |
| 99189 | C. T. McDaniel | 12 | $2,000.00 |
| 99190 | Estate of Addison L. Tulley, Jesse E. Tulley, trustee | 20 | 3,334.00 |
| 99191 | C. A. Hunter | 147 | 24,504.90 |
| 99192 | J. F. Ravenscroft | 78 | 13,002.60 |
| 99273 | Earl J. Pfeffer | 15 | 2,550.50 |
| 99302 | Emma P. Hackett | 15 | 1,900.00 |
| 99377 | Estate of J. H. Mimnaugh, E. T. Campion, executor | 508 | 84,683.60 |
The estate of J. H. Mimnaugh was completely administered and all assets thereof were distributed to the beneficiaries on or before March 16, 1925, on which date, by order of the court having jurisdiction thereof, the estate was closed and the executor discharged. On March 16, 1925, Eugene J. Mimnaugh had attained the age of 21 years, but*1314 his sister was then a minor. Before the closing of the estate there was distributed by the executor of the estate to Eugene J. Mimnaugh and to E. T. Campion as trustee for the use and benefit of L. Mimnaugh Johnston, respectively, a part of the promissory notes of the Bowman-Hicks Lumber Co. in the face amount and of the cash value of $13,000 each. L. Mimnaugh Johnston reached the age of 21 years on September 27, 1927, at which time the notes so distributed to the trustee for her use and benefit, the proceeds thereof, or other assets into which the same had been converted by the trustee, were delivered to her by the trustee.
A tentative return for the year 1923 was filed by Nibley-Mimnaugh on March 15, 1924, with the collector for the district of Oregon, to which was attached a letter requesting an extension of time for filing a final return. This tentative return did not purport to be a specific statement of the items of income, deductions and credits, and contained no information in that regard. It did disclose an estimated tax liability of $3,958.04, of which the sum of $989.54 was paid at the time of filing thereof.
On June 12, 1924, a corporation income tax return (Form*1315 1120) "For Calendar Year 1923" was filed pursuant to and in accordance with the extension granted. In the space provided therein for the name of the corporate taxpayer the following appears:
Nibley Mimnaugh Lumber Company (liquidated by transfer of assets as at August 3, 1923 to J. F. Ravenscroft, Liquidating Trustee for the Stockholders). *567 The net income reported thereon is $54,713.26. In schedule K of the return containing two balance sheets there appears at the top of each, respectively, the following, "Beginning of Taxable Period 1/1/23" and "End of Taxable Period 8/3/23." Attached to the return is a depreciation schedule bearing the date "Aug. 8, 1923", above the column showing total cost of depreciable items as of January 1, 1923, and additions thereto. The certificate of inventory attached to the return shows that the closing inventory as reported in the return was taken as of August 3, 1923. On the last page under the question "Kind of business" there appears the statement. "Lumber Principal In Liquidation since August 3, 1923." The date "8/3/23" at the top of the balance sheet as of the end of the period was inserted through inadvertence by the accountant*1316 who prepared the return because it was the date shown on the inventory schedule and because the inventory was actually taken on August 3, 1923. The date "August 8, 1923" on the depreciation schedule was a clerical error.
The profit, if any, resulting from the sale of the properties of Nibley-Mimnaugh to the Bowman-Hicks Lumber Co. was not included in the return filed by Nibley-Mimnaugh on June 12, 1924, nor has such profit, if any, ever been reported in any tax return filed by or on behalf of Nibley-Mimnaugh.
On March 14, 1924, J. F. Ravenscroft filed a fiduciary return (Form 1041) "For Calendar Year 1923" as "Liquidating Trustee: Nibley Mimnaugh Lbr. Co." in which the following statement appears:
The entire assets of Nibley Mimnaugh Lumber Company were conveyed to the Trustee, with instructions to reduce the current assets to cash and to sell the physical assets to the best advantage. Final disposition was made of the Physical Assets on March 1, 1924 (as of August 3, 1923, the date on which the purchaser took over the operation of the plant).
Distribution of the cash of hand to the extent of forty dollars for each share of stock formerly held was made on December 14, 1923 to*1317 the persons in the amounts stated, whose names are set out in the schedule attached.
Attached to the return is a schedule showing the amount distributed to each of the 34 stockholders, owners of the 5,000 shares of Nibley-mimnaugh stock, of the initial distribution of $200,000.
Under date of October 15, 1925, the internal revenue agent in charge of the Seattle division addressed a 30-day letter to Nibley-Mimnaugh, proposing the assessment of certain additional income tax deficiencies for 1910 and 1911 and 1916 to 1924, inclusive, and the allowance of certain overassessments for 1912 to 1914, inclusive, based upon the examination of the books, records and accounts of Nibley-Mimnaugh for the years 1910 to 1924, inclusive, by a revenue agent and his report thereon.
*568 At the time of the examination of the books and records of Nibley-Mimnaugh by the revenue agent, upon the basis of which the report of August 20, 1925, was made, Nibley-Mimnaugh, through its officers and representatives, took the position and contended that the sale of its properties to the Bowman-Hicks Lumber Co. was made by Ravenscroft, as trustee for the stockholders, and not by the corporation itself. *1318 The only adjustment made by the revenue agent for 1923 was the disallowance of depreciation in the amount of $22,688.21, which increased reported net income of $54,713.26 to $77,401.47 and resulted in a deficiency of $2,836.02. The explanation for the adjustment contained in the report is as follows: "Depreciation disallowed Aug. 4 to Dec. 31, 1923 account plant taken over by Bowman Hicks Lumber Co. on option to purchase." The "Computation of Net Taxable Income" made by the revenue agent covered two pages, one of which was headed "Period ended Aug. 3, 1923" and the other "Year ended Dec. 31, 1923."
The books of account of Nibley-Mimnaugh consisted, among others, of a cash book, journal, and ledger. These books of account were not closed on August 3, 1923, or as of that date. No entries were made therein on, or as of August 3, 1923, or any other time during the calendar year 1923, for the purpose of recording the disposition of the properties of Nibley-Mimnaugh under or by reason of the sale thereof to the Bowman-Hicks Lumber Co. The books were closed on or as of December 31, 1923. There were approximately fifty operating or nominal accounts contained in the ledger in which*1319 debit and credit entries were made during 1923 and subsequent to August 3. All transactions of the company made prior to and subsequent to August 3, 1923, with the exception of the sale of the company's assets, were recorded in its books of account and were reflected in the net income of $54,713.26 reported in the return filed June 12, 1924. The books of account were kept on the accrual and calendar year bases and its returns prior to and for 1923 were filed accordingly.
After the receipt of the 30-day letter of October 15, 1925, protests were duly presented by Nibley-Mimnaugh to the adjustments as made and to the assessment of the additional taxes as proposed. On April 7, 1926, a deficiency notice was mailed to "Nibley-Mimnaugh Lumber Company, c/o J. F. Ravenscroft, Trustee, Baker, Oregon" asserting deficiencies in tax as follows:
| 1922 | $2,076.66 |
| 1923 | 2,836.02 |
| 1924 | 48,526.91 |
The above deficiencies were assessed, under the provisions of section 279 of the Revenue Act of 1926, on April 22, 1926. The 1922 and 1923 deficiencies were paid on January 18, 1929.
*569 On June 16, 1926, a petition for redetermination of the deficiency of $48,526.91 for*1320 1924, bearing the caption "Nibley-Mimnaugh Lumber Company", was filed with the United States Board of Tax Appeals as Docket No. 17527. In that proceeding the questions involved were (a) whether the Commissioner erred in his determination that gain resulted to or was derived by the taxpayer corporation from the sale of its assets, consisting of timberlands and timber, to another corporation, the taxpayer contending that the sale was made by its stockholders, through a liquidating trustee, and not by the taxpayer as a corporation, and (b) whether the Commissioner erred in his determination that the gain from such sale, by whomever made, represented taxable income for the year 1924, the taxpayer contending that the sale was effective for income tax purposes when the contract was executed and possession delivered in 1923. In its report, promulgated on September 13, 1932, , the Board held: (a) That the sale in question was made by the taxpayer corporation and that any gain arising therefrom was taxable income to the taxpayer corporation, and (b) that the profit from the sale was derived by the taxpayer corporation in 1923. *1321 On March 17, 1933, the Board entered its decision in the proceeding in Docket No. 17527, wherein it was ordered and decided that there was no deficiency due from or overpayment due to the taxpayer corporation for the year 1924, and that there was an unpaid assessment for that year to be abated in the amount of $48,526.91. The Commissioner duly filed a petition for review by the then Court of Appeals of the District of Columbia. That court remanded the proceeding on May 7, 1934, , with instructions to set aside the order appealed from and to rehear the matter on the single question of whether the taxpayer was on the cash or accrual basis. The mandate further directed that "if the Board shall find that it was on the accrual basis the order heretofore entered shall be reinstated; if it shall determine respondent was on the cash basis, a final order in favor of the Commissioner shall then be entered."
By its order entered May 15, 1934, the Board set aside its decision so entered on March 17, 1933, and a rehearing of the single question directed by the mandate to be reheard was held on September 15, 1934. *1322 On June 14, 1935, the Board promulgated its further report, , in which it found as a fact that the taxpayer's books of account were kept on the accrual basis. On June 17, 1935, the Board entered its decision in the case, in accordance with the mandate, in which it was ordered and decided that there was no deficiency due from or overpayment due to the petitioner corporation for the year 1924, and that there was an unpaid assessment for that year to be abated in the amount of $48,526.91.
*570 On May 6, 1936, the Commissioner mailed a deficiency notice addressed to "Nibley-Mimnaugh Lumber Company, c/o Mr. J. F. Ravenscroft, Box 198, Baker, Oregon", advising taxpayer of a deficiency in income tax "for the taxable year 1923" in the amount of $48,952.15. This deficiency resulted from the inclusion in taxable net income for 1923 of profits on sale of assets of $395,524.72 less expenses of sale in the amount of $3,907.54, as determined by the Commissioner.
On August 1, 1936, a petition captioned "Nibley-Mimnaugh Lumber Company, by J. F. Ravenscroft, Trustee", was filed with the Board, Docket No. 85966, for the redetermination of the deficiency of $48,952.15*1323 for 1923. Upon the filing of the petition the Commissioner moved to dismiss the proceeding for lack of jurisdiction, which was denied. The proceedings came on for hearing on the merits and at the hearing counsel for the Commissioner renewed his motion to dismiss. On April 5, 1938, the Board promulgated its report dismissing the proceeding for lack of jurisdiction ().
On April 4, 1939, notices of transferee liability with respect to the deficiency in income tax of $48,952.15 for 1923 were mailed to the petitioners herein claiming such liability against each petitioner, respectively, in the amount hereinbefore set forth.
The asserted deficiency of $48,952.15 for the year 1923 has not been assessed by the Commissioner against Nibley-Mimnaugh. Neither has any assessment on account thereof been made against the estate of J. H. Mimnaugh, deceased, or the executor thereof, nor against any of the petitioners herein.
OPINION.
ARNOLD: The petitioners contend that the assessment of the deficiency in tax liability of Nibley-Mimnaugh for the year 1923 against them as transferees is barred by the statute of limitations. The respondent contends that the assessment*1324 is not barred because neither the tentative return filed March 15, 1924, nor the return filed on June 12, 1924, constituted a return required to be filed under section 239(a) of the Revenue Act of 1921 in order to start the running of the four-year statutory period. Section 239(a), in so far as applicable, provides that every corporation subject to taxation "shall make a return stating specifically the items of its gross income and the deductions and credits allowed."
No claim is made by petitioners that the tentative return was such a return as would start the running of the statutory period. In , wherein the Court held that a tentative return did not start the running of the statutory period of limitations, the Court stated:
* * * The *571 burden of supplying by the return the information on which assessments were to be based was thus imposed upon the taxpayer. And, in providing that the period of limitation should begin on the date when the return was filed rather than when it was due, the statute plainly manifested a purpose that the period was to commence only when the taxpayer had*1325 supplied this information in the prescribed manner.
The respondent contends that the return filed on June 12, 1924, is not such a return as required to be filed because it did not purport to be the calendar year return of Nibley-Mimnaugh for 1923. The return was made on the form required and reflected all the transactions of the company both prior to and subsequent to August 3, 1923, except the sale of the company's assets to the Bowman-Hicks Lumber Co. It was filled out in detail and numerous schedules were attached thereto. The return disclosed the transfer of the assets on august 3, 1923, and also that the company was in the process of liquidation thereafter. The respondent was not misled. Except for the addition of the gain realized on the sale of the company's assets the respondent's determination of the taxable net income of the company for the calendar year 1923 involved herein is the same as the taxable net income of the company for the calendar year 1923 as determined by him in 1926 as shown by the notice of deficiency dated April 7, 1926. This deficiency notice also covered the calendar year 1923 as well as the years 1922 and 1924. At that time he claimed that the*1326 gain, now included in taxable income for 1923, was properly includible in 1924 income. The amount of taxable income determined by him for the calendar year 1923, as shown by the notice of deficiency dated April 7, 1926, was the same as that reported in the return filed June 12, 1924, except that the respondent increased the reported income by disallowing depreciation from August 3 to December 31, 1923, claimed in the return. Certainly as to that item the respondent must have known that the amount of depreciation claimed in the return covered the entire calendar year 1923. It is reasonable to assume that if that item covered the entire calendar year 1923, other items in the return did so also. The statements contained in the return filed June 12, 1924, that the company's assets had been transferred on August 3, 1923, and that the inventory was taken on that date was not a misrepresentation. It apparently did not mislead the respondent. On its face the return filed June 12, 1924, purported to be a return "For Calendar Year 1923." The reference to the transfer of the company's assets merely called attention to such transfer and the position of the company in regard to it. No doubt*1327 this caused the examination of the company's records and resulted in the redetermination of its tax liability as shown in the 30-day letter dated October 15, 1925, and the notice of deficiency dated April 7, 1926, at which time no question was raised as to the *572 period covered by the return filed on June 12, 1924. At that time, it was apparently treated as covering the calendar year 1923.
In , the Court stated:
* * * Perfect accuracy or completeness is not necessary to rescue a return from nullity, if it purports to be a return, is sworn to as such ( * * *), and evinces an honest and genuine endeavor to satisfy the law. This is so though at the time of filing the omissions or inaccuracies are such as to make amendment necessary.
The books of the company were kept on a calendar year basis, the return was prepared accordingly, and the taxable net income reported therein reflected all transactions made during the calendar year except the gain realized on the sale of its assets to the Bowman-Hicks Lumber Co. No allegation has been made that*1328 the return filed June 12, 1924, was false or fraudulent and made with intent to evade tax. Under the facts and circumstances we hold that the return of Nibley-Mimnaugh filed June 12, 1924, was a return as required by the Revenue Act of 1921 which would start the running of the statute of limitations.
The deficiency in tax herein involved has never been assessed against the taxpayer or against the petitioners herein as transferees. The statutory period for assessment of taxes imposed by the Revenue Act of 1921 is "four years after the return was filed." Sec. 250(d), Revenue Act of 1921; sec. 277(a)(1), 1924 Act; and sec. 277(a)(2), 1926 Act. The period for assessment of the liability of a transferee is "one year after the expiration of the period of limitation for assessment against the taxpayer." Sec. 280(b)(1), 1926 Act. The deficiency notice for 1922, 1923, and 1924 mailed to Nibley-Mimnaugh on April 7, 1926, was within the four-year period commencing June 12, 1924, and therefore timely. By the provisions of section 274(a) and 277(b) of the Revenue Act of 1926, the running of the statute against assessment was suspended 60 days after the mailing of a notice of deficiency*1329 for an appeal to the Board and for 60 days thereafter. This extended the statutory period of limitations from June 12, 1928, to October 10, 1928. The deficiency notice for the year 1923 mailed May 6, 1936, to Nibley-Mimnaugh, was not within the statutory period as suspended and was therefore not timely and was ineffective to revive or to suspend the running of the statutory period. When once the statutory period has completely run, as it did herein on October 10, 1928, against Nibley-Mimnaugh, the Commissioner can not revive it by the mailing of another notice of deficiency. . The notices of deficiency addressed to the petitioners herein dated April 4, 1939, were not mailed within the one year additional time allowed for assessment against transferees, or on or before October 10, 1929, and *573 therefore were not timely. The assessment of the taxes involved herein has long since been barred.
In view of this holding, it is not necessary to decide whether the petitioners, Eugene J. Mimnaugh and L. Mimnaugh Johnston, are transferees of the property of Nibley-Mimnaugh within the meaning of section 280 of the Revenue Act of*1330 1926.
Decision will be entered for the petitioners.
Footnotes
1. Proceedings of the following petitioners are consolidated herewith: Estate of Addison L. Tulley by Jesse E. Tulley, Trustee; C. A. Hunter; J. F. Ravenscroft; Earl J. Pfeffer; Emma P. Hackett; Eugene J. Mimnaugh; and L. Mimnaugh Johnston. ↩